Abu Dhabi property set to show steady growth in ’15

Residential apartment values demonstrated strong capital appreciation during 2014 ranging between 11-35 per cent with an overall average increase of 21.6 per cent. 

Abu Dhabi — Abu Dhabi’s property market, which posted a double-digit growth in capital value last year, will continue to show steady growth in 2015.

The capital’s designated areas where expatriates can invest in property, show capital value growth of 21 per cent, while the villa value grew by 15 per cent, says a research report, by MPM Properties. Residential apartment values demonstrated strong capital appreciation during 2014 ranging between 11-35 per cent with an overall average increase of 21.6 per cent. Villa values also experienced strong growth ranging from 5-30 per cent, with an overall average increase of 15 per cent.

The latest quarterly report issued by MPM properties, the real estate consultancy arm of Abu Dhabi Islamic Bank (ADIB), highlights value growth across all sectors of Abu Dhabi’s real estate market during 2014. Thanks to the government initiatives to stimulate job growth and enhance market sentiment, fuelled in part by a knock on effect from the Expo 2020 win, provided healthy demand across all asset classes.

The property consultancy firm expect the real estate market to continue to grow steadily during 2015 with anticipation that the market will witness the introduction of new real estate regulations. The launch of the Abu Dhabi Global Market Financial Free-zone; opening of The Louvre Museum and the ongoing infrastructure developments will help fuel demand for the residential and office sectors and support continued growth across the retail and hospitality sectors.

In the last quarter of the year the residential sales market witnessed a marked slowdown in transactions due to the widening gap between asking and offer prices, with sale prices showing no increases in the last three months.

Data analysed by MPM shows that sales volumes during November and December of 2014 were at a 20 month low, impacted by the lower LTV ratio’s introduced by the UAE Central Bank. The Abu Dhabi market continues to be dominated by individual investors, with sale prices increasing faster than rents, eroding yields which have dampened investor demand. This trend will continue until sellers agree lower prices or rents rise to help investors achieve net yields within a range of 5.5 to six per cent.

In terms of the ADIB Rental Index, an increase of up to five per cent continued to be the common trend during the fourth quarter 2014. During the same quarter Zones A, B and C witnessed average rental growth of 7.5-10 per cent as residential units with water views or access to facilities and amenities within these zones were in high demand.

“The current market is effectively a three-tier market,” said Paul Maisfield, MPM chief executive. “The mid-tier properties, which takes up most of our portfolio, are seeing a stability in rents with an average five per cent increase, reflecting the fact there is a ready supply of such properties and thus landlords are mindful not to push rents too high and risk occupancy levels falling.”

“At the top end of the residential market there is a shortage in supply, and occupancy levels are high within the most popular developments and communities, and with the limited choice tenants now have rental increases of 15 to 20 per cent are common at lease renewal. At the bottom end of the market with the older properties there is also a shortage of supply which is pushing up rents and in percentage terms these have been hit the hardest,” he added.

In 2015 we will see multiple residential and commercial projects being completed on Al Reem Island, Corniche, Danet Abu Dhabi and Capital Center. During the past year the Abu Dhabi residential sector saw the launch of the first off-plan projects for over six years, with Aldar launching three projects Hadeel, Ansam & Nareel totaling approximately Dh5 billion, and comprising over 900 units.

TDIC launched its first residential development within the Cultural District Mamsha Al Saadiyat comprising 461 units. All projects generated significant demand with all inventory released sold, and the expectation of new projects being launched during 2015.